Billabong rides high after $87m earnings jump

Page Tools

Chief executive Derek O'Neill says Billabong's result, which is in line with its guidance and broadly squares with market expectations, is outstanding.Picture:Ben Rushton

Surfwear clotheshorse Billabong International surfed to a 14 per cent profit gain yesterday, and promised more robust earnings would follow.

Billabong increased net profit to $87 million for the year to June 30 on revenue that gained 8 per cent to $675 million.

Billabong chief executive Derek O'Neill described the result - in line with its guidance and broadly squaring with market expectations - as outstanding. He said buoyant trading conditions had helped overcome the effect of a strong Australian dollar.

Mr O'Neill said Billabong expected net profit and earnings per share to rise by about 20 per cent by the end of the financial year.

"Our forward orders indicate that the buoyant trading experienced in the 2004 year is continuing and that gives us confidence in our outlook for the current year," Mr O'Neill said.

Billabong maintained its dividend payout ratio at 62 per cent, with shareholders due for a full-year fully franked dividend of 26.5 ¢, compared with 23.5 ¢ for the previous year. The dividend will be paid on October 25.

Earnings per share rose 13 per cent to 43 ¢ and Billabong's long-term profit growth target remained at 15 per cent.

AdvertisementAdvertisement

Sales in the US grew 30 per cent to $US229 million in local currency terms, a rise of 7 per cent in Australian dollars to $323 million.

Billabong's European sales grew 13 per cent to EUR94 million, a 5 per cent rise in Australian terms to $159 million.

The European trading environment had been challenging after a difficult winter. "The company's performance in managing these changes was uneven from region to region," Mr O'Neill said.

Analysts said the European business was continuing to experience operational issues after management changes in this division announced in June.

Macquarie Equities has an "outperform" recommendation on the stock and a 12-month price target of $9.66.

"Guidance for 20 per cent net-profit-after-tax growth in the 2005 financial year implies a $104.4 million net profit after tax," Macquarie Equities said in a research note. "At this stage we are unlikely to materially alter our $104.2 million forecast."